Making Category Management Successful – The most successful companies worldwide are making category management successful by integrating it business-wide to achieve and sustain success.

Here we offer six requirements for making category management successful:

1. Flexibility

One key to making category management successful is it is not a ‘one size fits all’ approach but must flex by sector, category and business need to be relevant. Robust processes and frameworks are fundamental for a high performing function. They empower the procurement team and ensure a smooth consistency of execution, especially when supported by influencing skills.

2. The ‘one way we buy.’

All businesses must buy, add value, and sell to stay in business, and all ‘buy activities’ are a part of Category Management in one form or another. There is not ‘Category Management’ or ‘Business as Usual’. Competitive advantage comes from how well you execute, whether it is a five-year category strategy, a one-off negotiation, or resolving a supplier problem, how well you execute makes the difference between success and failure.

3. Focus on the Business Priorities

If you can’t demonstrate your contribution to the business priorities, you are an onlooker. Today’s CEO wants procurements golden triangle – cost leadership, revenue enhancement, and sustainability. Every CPO must focus on their organization’s competitive priorities, such as speed of sourcing, supplier innovation, and supply chain flexibility to deliver on the business strategy.

4. Build a team of aspiring Brave CPO’s to drive the process

Having a team committed to Category Management ready to market and sell its benefits to stakeholders is key. Utilize skills gap analysis assessments, training to develop existing staff, and develop stakeholder engagement skills.

5. Category management as an entrepreneurial creator of value

The best, Category Managers are entrepreneurs with a growth mindset, ready and able to spot and capture opportunities to create value from supply markets. There are many ways to create value and drive savings beyond the obvious opportunities from volume consolidation and competitive leverage, including cost modelling, specification optimization and supplier integration, etc.

6. Communicate in the business language

Develop a communication strategy, using business, not procurement, language. Communicating to stakeholders in their language will enable them to understand the benefits that procurement can deliver.

To make Category Management a priority, executive teams must provide backing in terms of financial investment, physical resources and visible involvement. We provide 5 steps to making category management a priority in your business:

What’s in it for you?

Strengthen balance sheet and finance fundamentals

Reading time:

10 minutes

1. Introduction:

As many industries still struggle to find indicators pointing towards sustainable economic recovery, they face uncertainty over future growth and how to manage the lengthy process of debt reduction, or deleveraging; that will apply a drag on growth and an increased focus on financial viability.

Leverage is still very high in some sectors such as commercial real estate and mining; companies have leveraged acquisitions in the years before the collapse in commodity prices. For many, while interest rates remain low, they enjoy the benefits of cheep credit. If rates creep up however, investors might start to worry about the companies with the most debt, who are vulnerable to income shocks forcing distressed asset sales to remain viable. As a consequence, these organisations are focusing on cost containment as never before. Enter procurement.

2. Aligning Finance & Procurement Strategy

CFO’s have two options when seeking to deleverage their organisation’s finances; restructure or repayment. See Fig 1. While the CFO may claim ownership of the restructuring domain, the CPO can stake out their role in any strategy to repay debt. By collaborating, to develop a joint debt plan the CFO and CPO can provide faster and more productive outcomes than either of them acting alone.

2.1 Procuring Cash Flows

The organisations capacity to generate cash from operations, asset sales, or external financial markets over its cash needs, determines its ability to repay debt.

Procurement activities primarily impact cash flows from operating activities which with careful management can reduce the need for CFO’s to resort to distressed asset sales. It is useful therefore for procurement to view its actions concerning their impact on cash flows. Fig. 2.

Fig 2: Procurement impact upon cash flows

Procurement’s role is to free up cash, reduce capital employed and reduce cycle time in the supply chain to improve liquidity and support borrowing capacity. Fig 3:

2.1.1 Free up Cash:

By negotiating improved terms with suppliers, procurement effectively creates free finance to help repay debt or fund future growth. The management of capital investments via optimising life cycle cost and lease vs. buy etc. can also free up cash significantly.

2.1.2 Speed up Cash Cycle times:

Procurement can either get money to ‘move faster’ around the operating and cash conversion cycle or reduce the amount of money ‘tied up’ in it. Both ways, either more cash is released or borrowing needs to fund working capital are reduced. Consequently, organisations can choose to pay off debt to lessen the cost of bank interest, which in turn increases EBT or have additional free cash available to support further sales growth or investment.

2.1.3 Improve Debt Capacity:

By improving operating cash flows, asset sales and cost, procurement increases EBITDA and improves the capacity of their organisation to borrow. Conversely, weak EBITDA can adversely impact the company’s liquidity and hence credit facility, which decreases borrowing availability, while suppliers are also likely to tighten payment terms.

2.2 Savings Capture

Before the CFO has the confidence to allocate procurement savings to service debt to shorten the finance term, they must have the confidence that reported benefits will flow to the bottom line. Critical to gaining confidence is creating visibility into the savings process and successfully managing the link between finance and procurement. To make this happen requires a formal savings process incorporating the following features:

2.2.1 Systemised tracking

The procurement and finance function must accurately track the overall progress of cost savings. Capturing them in a project log incorporating an agreed baseline against which benefits are measured. Establishing this tool provides the means to monitor procurement’s progress and compare it with established milestones.

2.2.2 Linking procurement savings to departmental budgets

Savings become embedded into budgets based upon contracted savings measured against the agreed baseline and assumed levels of demand signed off by the budget holder.

2.2.3 Tracking of estimated savings through to realised savings

Significant variances between budgeted savings and realised savings can occur due to changes in demand, currency fluctuations, etc. So realised savings are very different to budgeted savings. Based upon the actual invoiced goods and services value measured against the defined baseline. Variances need to be normalized as appropriate to evaluate procurements impact.

2.2.4 Category specific savings rules & dashboard monitoring

Savings rules must be category specific, conducting monitoring at the category level due to the high level of complexity, different levels of granularity, category specific elements and case by case decisions.

The savings measurement process must overcome these challenges by observing the following requirements:

Exhaustive and flexible savings rules to allow for future changes and developments

Ease of understanding and use, balance between consistency and applicability

Rules and tools accepted by all budget holders

Fact-based, trusted figures reflecting the actual impact and building credibility

Organisation-wide consistency, treating similar scenarios similarly across all entities

2.3 Metrics

Debt to Equity = Current Liabilities + Long Term Liabilities/Shareholder Equity

Debt Coverage = EBITDA/Debt Service

Free Cash = EBITDA – Debt Service

3. Conclusion

While many organisations have been forced to resort to asset sales to survive the downturn, further deleveraging is likely to be a key focus for many. Procurement can play a vital role in this process if the proper capabilities are invested in, which in turn will strengthen the overall financial performance of those organisations who do so. This includes developing a robust savings process and framework to ensure savings impact the profit and loss.

Collaboration with finance is critical for success, so the CEO should make sure the CPO and CFO are working side by side towards agreed corporate goals. Organisations that achieve this will, in future benefit over those who do not through stronger balance sheets, improved cash flows and better than industry norm margins and borrowing capacity. Creating opportunities for buying up distressed asset sales from weaker competitors.

The key question is what kind of procurement operation will have the capabilities to go beyond incremental cost savings to generate the transformational performance improvement that can significantly reduce leverage? Not one driven by day to day operations, reporting at a low level in the organisation and lacking leadership and support from the very top.

]]>If you can’t measure collective procurement team capability – are you really capable?

With more powerful skills assessment tools available today, businesses are increasingly incorporating them as a part of their development programs, to adopt a more strategic, data driven approach approach to capability development focused on understanding collective procurement team capability rather than just individual capability.

CPO’s wouldn’t dream of allowing managers to keep intricate details of the company’s physical assets in their heads, their capabilities, utilization etc. However, with employee skills and resource management, this exactly is what happens. Despite CPO’s acknowledging the importance of people and the increasingly challenging battle for talent, many organizations don’t leverage technology to help them better manage, develop, and deploy their people.

1. Choosing the right procurement skills assessment

Fundamental to the use of assessments is their credibility. Assessments must demonstrate reliability and flexibility to ensure valid and equitable outcomes, using agreed standards that are applied to provide enterprise-wide insights.

You don’t need a labor intensive skills management program to benefit from skills assessments. iProcure provides a scalable online solution, and results are stored in a secure database that enables analysis and review for the immediate purposes of hiring, training and development and succession planning. Furthermore, the ability to measure learning over a training program helps drive greater overall impact from your development programs.

Use iProcure to identify collective competence at an organizational, team, role or competency level. Apply this insight to prioritize development of more effective recruitment and training events and support succession planning.

3. Ask SID (Skills Intelligence Database)

iProcure provides a comprehensive database making up your organization’s collective knowledge to locate individuals with specific skill sets. For example:

3.1 Project Staffing

When staffing special projects, it is important to put together team members whose skills are complementary. Insights provided through iProcure help you avoid building teams with ‘collective weakness’ in critical areas. Easy to read graphic visual displays help to ensure your project teams have the best mix of skills to support the projects goals and objectives.

3.2 Merger & Acquisition Integration

iProcure enables the rapid assessment of target company employee’s using your organization’s competency framework to identify high performers, benchmark against existing staff, and identify development needs early on.

With speed of integration a critical factor for driving value from M&A, this ability to assess and deploy incoming staff rapidly becomes the key value driver.

3.3 Career & Succession Planning

With iProcure, managers and employees are better able to develop a career plan. iProcures ability to track learning and map results back to defined maturity levels helps to develop appropriate development plans and to signal when employees are ready for the next level.

3.4 Recruitment & Benchmarking

Using iProcure, you can measure the knowledge of your existing employees and use the results as a benchmark for external candidates. Go a step further and compare your employee’s results against all those who have taken the same assessment across the globe.

4. Conclusion

Talent is widely recognized as the single largest challenge facing CPO’s today, where the need to attract, develop and retain top procurement talent continues to be a competitive differentiator. Failure to take this seriously will undoubtedly leave organizations seriously under-resourced without the right, capability and competence to deliver against business goals.

Data, technology, processes, and talent, are the pillars of procurement success. iProcure turns employee inputs into hard data, using technology that can be scaled globally to help drive the value added by the procurement organization.

Evolution is necessary to survive, and by taking regular inventory of your team’s skills and maintaining the right balance, CPO’s can establish a sustainable, continuously growing, and truly value-added procurement organization.

Procurement Skills Tracking and Performance Improvement in iProcure allows Managers to identify employees with the right skills for a Job and make informed decisions on recruiting, developing, and promoting.

Imagine that you need a Category Manager at the other end of the country or thousands of miles away on a different continent.

Now imagine that you can look into an internal database that tracks employees skills and competencies, where you identify a Category Manager, who was finishing a high-profile category project. The new post requires someone skilled at Supply Market Analysis, developing category strategies, and leading category programs. The Category Manager demonstrates high performance on those skills, and would be ideal for the job.

That is the promise of the iProcure Skills database. By tapping the database to fill specific needs, to anticipate, and head off, looming talent shortages; support career-development paths, and plan succession. In short develop bench strength.

By creating a database in iProcure with the skills of each employee, managers can analyse the data to identify both individual and collective strengths and weaknesses of the team.

Procurement Skills Tracking and Performance Improvement

Define the competency framework that supports your business goals and objectives

Develop an assessment to measure your team’s knowledge and skill levels in these competencies

Set role based targets for each competency

Conduct assessments to identify skills gaps

Implement development plans to close the gaps

Measure progress in closing any gaps

Make sure engage with their team by including the process in their performance reviews.

Benefits of Bench Strength Analysis

Bench strength analysis enables the identification of the collective competencies, of all employees and includes a degree of measuring job suitability for all staff for all positions so management knows which individuals should be groomed for targeted jobs, i.e., succession planning. Metrics include:

The number of successors available for any given position

Strength of talent pipeline

Training plans in place to address talent gaps

% of employees ready for promotion

Conclusion

In the end, a procurement organization is nothing more than the collective competency of its people to create value. It follows that the largest potential gains in performance for CPO’s come from building the bench strength of their team.

Access to clean reliable data is essential lifeblood procurements future – for years, category managers have worked in the data grey zone – this needs to change:

Introduction

Large, medium and smaller companies collect masses of data: product, prices, payment, delivery information, and more. This “transactional data,” is used by businesses to understand better their customers and optimize their supply chain.

The intelligence gained from data will bring procurement professionals out of the fog and into the light, where category strategy success and benefits reporting can be proven more definitively in hard numbers.

For years, category managers have worked in the grey zone. They know that “the Grey and dark data zone” can be an uncomfortable place representing missed opportunity, increased risk and without the data needed to help convince or influence their internal stakeholders. CPO’s, therefore, need to champion urgently a data-literacy movement to empower them to build robust ‘known data’.

Becoming Data Literate

Becoming data literate requires understanding where the data is coming from and how it’s used to develop category strategies. Category Managers can then use this information to develop strategic category plans that will save money and increase margins, address supplier performance issues to strengthen supply chains and reduce risk.

CPP Open Hidden Unknown Blind

Step 1: Hire Analytics Talent or Partner with a Procurement Analytics Company

With experienced category team members either from an external consulting company or inside analyst, businesses can begin to collect and organize data into actionable intelligence. Understanding customers, the category management process, operations, and suppliers require very sophisticated technology utilizing algorithms that automate the data capture and cleansing process. Such systems are available to provide much more relevant data to produce category strategies and strategic sourcing and supplier management initiatives. CPO’s who embrace this brave new world of ‘Big Data’ will have at their disposal a data-driven source of competitive advantage.

Step 2: Cultivate a Data-Focused Culture

Category Managers who have spent entire careers developing spreadsheets put together with data from disparate systems need to transition out of this piecemeal world. Also, the skills to managing contracts and conduct strategic sourcing might lose importance. Making the switch can take time.

Not only do they need to change attitudes, but they will also have to pick up new skills, work habits, and processes.

Step 3: Opperationalize Procurement Analytics

Cature the data, generate reports that provide insight and then use this for day to day activities to opperationalize procurement analytics in areas such as sourcing, contracts, and P2P.

Discover the commonalities between certain types of categories and suppliers and consider widening your segments from five to ten for example. Better-defined categories and suppliers mean more focused strategies and better-informed category teams.

Step 5: Measure, Report, and Improve

Don’t stop with the talent and systems. The cost of poor data can be significant – procurement teams produce monthly reports showing savings and supplier performance data, which demand clean validated data so that incorrect reporting does not damage their credibility.

Some of the most valuable data you’ll have access to is the results of your sourcing initiatives. So CPO’s need to be able to track savings from contracted to realized int the bank. Use information and insight monitoring, continuous improvement, to make one-off decisions such as structure, governance/compliance, and procurement performance issues.

Build procurement plans from these results and watch your ROI rise.

Clean reliable data is essential lifeblood of procurements future

A call to action:

Having the right analytical tools and the talent to use them can greatly improve procurement decision making and effectiveness. This will drive better results that are accurate and measurable, resulting in lower costs and greater savings.

If you are feeling pretty blind and data-illiterate at this point, it is not too late to put a plan in place that addresses data visibility and literacy.

]]>M&A Value Creation: Bench Strength Assessment Critical – so with the right talent assessment and selection process CPO’s can ensure that the right people with the right skills ﬁll carefully defined roles in the expanded organization.

Building a world class team bench

1. M&A Value Creation: Bench Strength Assessment Critical

Introduction

M&A due diligence in procurement talent is a dangerours corner to cut

M&A Value Creation: Bench Strength Assessment Critical so CPO’s require practical methodologies to select the right people and build a strong bench to deliver value from the merger and beyond.

CPP Talent Management in the CPO’s Positioning Matrix

Selecting the new procurement team is one of the most important decisions CPO’s will face when combining two organizations resulting from a merger or acquisition. It is a decision with lasting and often underestimated implications. The team selected by the CPO will define the new procurement organization’s capabilities. Stakeholders, employees, and board members will watch carefully because your decision sets the tone for the integration, as well as procurements position in the new organization.

As the CPO of the new organization, your ultimate goal is to select the team who will create and drive value. Whether the bench comprises players from the legacy company, the acquired organization, or recruited externally, the new team must demonstrate leadership competencies and behaviors aligned with the business strategy, operating model, and desired culture of the new organization.

2. A Question of Merit

A key M&A objective is to acquire valuable procurement talent to strengthen the team bench

When positions don’t get filled on the candidates merit, the consequences of perpetuating such arbitrary stafﬁng decisions can be the ‘wrong people filling the wrong jobs’ for years to come following a deal.

CPO’s need to take care that their stafﬁng decisions clearly demonstrate:

those selected for the role are accomplished in that role

their skills and experiences are relevant to the organization’s future.

Poor selection processes often lead to poor stafﬁng decisions and placing the right people in the right roles is never easy. It takes time, discipline, and selection practices that are comprehensive, yet relatively straightforward to implement. At a minimum, it requires:

Clarifying core competencies and skills: needed for particular jobs requires knowledge of which positions will change following the integration and how they will change. CPO’s must ensure job descriptions that adequately deﬁne each post. Determining the desired competencies, allows you to assess candidates against standard criteria that meet the organization’s future needs, rather than replicating current organizational structure or the candidates’ past performances or roles.

Identifying skill gaps: Skill gaps should be identiﬁed and prioritized as soon as possible once the new organization design is available. Your team must be sufﬁciently skilled in adjusting to resulting systems and process changes.

Aligning job levels: Properly aligning job levels between the two companies should begin as soon as possible after the close.

Aligning the assessment and selection process to deal timing: A phased approach to team selection throughout the integration process:

Leadership and top management positions are ﬁlled during the early stages leading up to Day One or shortly after that.

Phasing the selection by job levels enables you to make simultaneously strategic selection decisions, build the team bench and organizational design.

Providing needed job training: Training may be required to support core competencies when introducing new systems or processes regardless of whether the employee operates at a local or regional office, or at the corporate headquarters.

3. Knowledge Transfer & Retention

Take steps to ensure you identify the people and knowledge critical to immediate and longer-term business goals

Relying on the target’s management to identify employees critical to retain can have its problems. They don’t necessarily identify the knowledge transfer people needed. Instead, they pick the managers of the key people on their staff, but they may or may not be key to the integration effort. A carefully tailored knowledge based skills assessment can help.

Many companies typically only look one level down from the C-suite, but using talent analytics at each level of the organization, means the integration team will be prepared on Day 1 to make key staffing decisions immediately based on data, not politics.

3.1 Validity . Reliability . Flexibility . Equitable

Using a skills assessments with the validity and flexibility to incorporate the identified core competencies and systematically identify applied knowledge and skills gaps can help to assess candidates objectively by providing the desired reliability and equitability of outcomes.

Conducting a process that is fair and unbiased will satisfy legal counsel or HR on matters such as consistency in the selection process for all candidates and for favoritism to reduce the chances of litigation or other legal repercussions that could create negative publicity, internal turmoil, and legal costs.

4. Bench Strength Assessment Critical to M&A Value Creation

Conclusion

Procurement Talent Development

The integration of the two organizations is ultimately the real-world test of a successful merger or acquisition. For the combined company, it can mean the difference between ongoing financial success and failure. So the CPO must ensure Procurement play’s a prominent role in any integration team to ensure optimization of the procurement team bench during the merger or acquisition.

To ensure a good fit, the CPO must clarify and articulate the core competencies and skills required for key jobs.

A bench strength assessment will identify where knowledge lies and baseline maturity levels in critical competencies to steer a path towards the desired future state.

Furthermore, regular evaluation of employees will help the organization determine what drives engagement as well as help guide employees in career planning.

Call to action:

With the right talent assessment and selection tools, CPO’s can build a team bench capable of, delivering value from M&A, compete with the best and adapt to changing business needs by managing and refining the bench to provide long-term value for the organization.

Nuff said …

If you would like to learn more about our Competency Profiling and Bench Strength Assessment services you can contact us here

iProcure provides market leading analytics and reporting to your desktop

M&A Value Creation: Procurement Analytics because cost savings are seen as a key value driver in any M&A deal by institutional investors and shareholders alike. The ability to deliver this value, therefore, is critical to the credibility of the CEO and the senior management team.

1. The Brave CPO: M&A Value Creation: Procurement Analytics Critical

With still many mergers failing to achieve their expected value, CEO’s are under pressure, and CPO’s must step up to the challenge to deliver savings both pre and post the deal closing.

Since both the success of the merger and the CEO will be judged on how effectively the business fulfills its promise to deliver shareholder value, the CPO should have the full attention of the CEO. The Brave CPO will grasp such an opportunity to demonstrate their skills and the strategic power of procurement.

2. How does Procurement Analytics Support M&A success?

With around 50% of merger value coming from the supply side, visibility into all aspects of procurement data is critical. Applying procurement analytics pre-closure in ‘clean room conditions’ can ensure management values the target firm accurately, and has the foundations for synergy realization established before the deal is closed.

2.1 Pre-Closing:

The due diligence phase requires the ability to extract and analyze data quickly to identify synergies and value creation opportunities.

a) Spend Analysis:

Spend analysis supports the development of a robust category structure that organizes spend around market-facing spend categories and having a well-defined category structure provides the CPO with a significant advantage when evaluating the potential from a merger.

Having the capability to extract information from disparate financial systems and cleanse and enrich this data to build a merged category taxonomy, supports the ability to map joint spend to major categories.

With the data cleansed analysis of category strategies and purchase, terms can be compared across both companies to identify situations where the combined new company would be:

Paying different prices for the same items

Using different items for the same application

Using common suppliers for goods and services

Using different suppliers for goods and services

Dealing with non-preferred suppliers

Using too many suppliers to leverage the companies purchasing power.

There are enormous benefits to be gained from undertaking an in-depth spend analysis as opposed to simply conducting a quick contract comparison between suppliers.

b) Contract Management:

Supplier contracts for both companies need to be gathered. Without access to a centralized repository, this can be a challenging task. The ability to access a database that provides detailed contract information such as:

pricing

start and end date

cancellation rights

assignment rights etc.

provides a further benefit to CPO’s managing a merger by supporting due diligence, identifying future resourcing constraints and more informed prioritization decisions.

The opening of the books is always a nervous time for the incumbent CPO. There is, however, need to go beyond the competitive bravado of “my price is cheaper than yours” comparisons.

Mergers that achieve the highest returns go beyond simple price comparison to an analysis of total cost in quantitative and qualitative terms in both companies.

c) Supplier Management:

Access to supplier data to assess supply chain risk in the merger is a critical activity pre-merger. Identifying:

Suppliers at risk of bankruptcy

Suppliers that raise sustainability concerns

Ethical labor issues that could damage the companies reputation

Supplier diversity issues

Supplier scorecard data and key performance indicators

Such data provides the visibility into issues that require corrective action plans and compliance reporting.

d) Integration Planning

Successful merger integration planning also requires developing an implementation roadmap, which is often part of the first 100 day plan. Such a roadmap may include:

Structure of the new organization

Supplier and customer impact analysis

Supply chain integration

Value lever identification

Quick win initiatives

Sourcing project prioritization

Negotiation strategies

Ready to launch RFP’s

Agreement on benefit tracking and budgetary adjustments

Standards and tools review

All of this must be done in collaboration with legal counsel while continuing “business as usual” in each business.

2.2 Post closing

The pre-merger planning should ensure, a high degree of executive alignment is already be in place. However, in the integration phase, resistance from middle management can still provide a considerable obstacle to successful implementation.

Using hard data to overcome resistance

Established relationships with suppliers, encroachment upon current responsibilities, and even a sense of feeling threatened can result in objections raised to senior management, who do not possess the analytical data to verify or overcome them, elevating a sense of risk.

The hard data available from Procurement Analytics is the key to success. It brings objectivity to an otherwise emotional or anecdotal argument. By using hard data gained from the analysis, procurement can often bring new information to the table that was previously unknown to stakeholders to support decisions and navigate internal challenges.

3. M&A Value Creation: Procurement Analytics Critical

Conclusion

Procurement is one of M&A’s most important activities delivering increased value by:

Buying goods and services more effectively, and

Operating the combined supply chain more efficiently

CPO’s can position themselves for advantage over their counterpart in the merged organization, with well-established category taxonomies, contract, and supplier management disciplines. Capitalizing on this advantage requires strong pre-merger procurement planning. Here, access to granular procurement data is the key to strengthening procurement performance. The right Procurement Analytics tool, one capable of accessing multiple databases across both organizations, providing a single version of the truth, therefore, can make the difference between the CPO being crowned king in the new organization or finding themslves seeking an alternative position.

Nuff said…

You would like to learn more about our Procurement Analytics solutions here or contact us here.

]]>http://purchasingpractice.com/ma-value-creation-procurement-analytics-critical/feed/0Talent management critical to CPO longevity on the jobhttp://purchasingpractice.com/talent-management-critical-to-cpo-longevity-on-the-job/
http://purchasingpractice.com/talent-management-critical-to-cpo-longevity-on-the-job/#respondThu, 03 Dec 2015 16:39:50 +0000http://purchasingpractice.com/?p=11832Failure to develop a world-class team a factor in shortened CPO longevity on the job Talent management critical to CPO longevity on the job –

]]>Failure to develop a world-class team a factor in shortened CPO longevity on the job

Talent management critical to CPO longevity on the job – As procurement becomes increasingly strategic, focused on the long-term, and integrated within the business, talent management becomes a critical success factor for the CPO. Furthermore, in a recent report, a failure to develop talent at all levels is cited as a factor in shortening the longevity of a CPO.

1. Talent management critical to CPO longevity on the job

The Effective CPO

CPP Talent Management in the CPO’s Positioning

To be effective, the CPO requires a skilled team to align and support the business, design the supply chain, implement the metrics and execute supply strategies that will change management focus from cost savings to value delivery.

Suitable talent is scarce, with intense competition between CPOs to recruit, develop, and retain a team capable of developing and executing a world-class result’s based supply strategy.

The effective CPO, therefore, prioritizes recruiting and developing their talent base and retaining high performers, to ensure that there are the right capabilities to drive more strategic procurement. They build a collective competence within procurement, embedding intellectual capital and know-how, that survives changes in personnel.

2. What is your competency framework?

A competency model should provide a verifiable link between the role and the organizational goals. It provides the blueprint for recruiting, developing and promoting the right talent. Without a clearly defined competency framework, there can be significant gaps in key capabilities that can lead to missed opportunities, higher cost, and lower overall procurement effectiveness.

To fully leverage the value of the competence model, the organizational systems can be used to do the following:

Design job profiles and performance assessments to gauge the competence levels of candidates before you hire them

Communicate what success looks like in specific, and measurable terms

Provide assessment tests to assure the business that certified employees really can fulfill their role competently. Not just that they have the required knowledge and skills.

Gap Analysis & Training Curriculum: Provide training based on known gaps in competence and opportunities for building competence

Provides company-wide aggregated reporting so you can make collective knowledge visible to those that need to plan succession, make development plans, and engage employees to provide feedback, coaching, performance reviews and collaboration opportunities.

By taking the time to creating an effective competency model, the return on investment is substantial and long lasting.

3. Assessments & high performing teams:

According to an Aberdeen Group study, the pressure to hire, retain and develop talent to support growth and adapt to the rapidly changing business environments are the top drivers for the use of assessments today.

A high-performance culture only exists when it delivers high performance. So an organization’s ability to achieve results through the use of assessments depends on how they are used to make better talent decisions.

Fig 1: Impact of Best in Class Assessments Source: Aberdeen

To bridge capability and leadership gaps requires an assessment strategy that supports the business goals. Aberdeen found that organizations achieve double-digit gains over competitors in their ability to achieve goals and execute strategy, hire individuals who can get up to speed quickly, and improve overall engagement of their team with the business. See Figure 1.

4. Develop your talent

CPP Procurement Talent Development

Using the skills assessment outcomes, CPO’s can conduct a skills gap analysis to identify their team’s training needs and implement a training program that directly supports the strategic goals of the business.

They then have the hard data necessary to make strategic talent management decisions, such as:

What is the overall competency of my team?

What is their maturity level in each core competency?

Where are my superstars located?

What development plans are required to fill skills gaps and what will be the overall impact on my team’s maturity level?

Being able to answer such questions and have the data to support it is a powerful tool when planning for training and development budgets and for justifying claims to senior management. Furthermore, once training is underway you can also use the same tools to show progress, and map this back to company goals.

5. Recruit your talent

What are the development needs of incoming employees?

In addition to developing talent, there is always a need to recruit externally. Using the competency profile, and the competency analytics available from a skills gap analysis CPO’s can review external candidates against their competency framework and benchmark existing employees in the same or similar roles. In this way CPO’s know the development needs of each candidate before they hire them.

For example, competency scores can be mapped to a maturity framework for further comparison between the candidates to indicate their applied competency level against the targeted applied competency level for the role. CPO’s can select for example their top 10% performers and compare this group’s skills, personality traits, experiences, and knowledge against the candidates, creating a model for success in the role.

6. Create career ladders

Somewhat ironically, capability development is an investment that yields a strong short term ROI; but also one that equips staff with a wider range of skills and expertise, and the tools to make it easier to leave to join other companies for better opportunities.

To prevent such a talent drain and ensure that companies and individuals are benefiting, it is essential that CPO’s offer tangible and compelling career progression options for procurement professionals.

To determine which procurement executives deserve special treatment, CPO’s and HR departments should build into performance appraisals and measurement the skills identified in the competency profiling as critical to business success.

Moreover, the company must reward procurement professional who meet targeted performance criteria with greater compensation.

7. Become a Management Academy

By following these guidelines CPO’s will start to get recognition for:

Developing their people

Recruiting a mixture of internal and external people to fill vacancies

Exporting effective managers to other functions and business units of your company?

They start to expand procurement’s value proposition and influence by becoming an internal talent development academy, supplying a pool of new leaders into the business. When you start exporting talent, you also become a magnet for the best talent.

By adding a talent management metric into the CPO’s overall performance scorecard, provides the opportunity for the CPO to communicate this goal, tick the successful completion box, extend their longevity and ultimately facilitate their successful rise to the next level.

]]>http://purchasingpractice.com/talent-management-critical-to-cpo-longevity-on-the-job/feed/0The three goals of strategic procurementhttp://purchasingpractice.com/the-three-goals-of-strategic-procurement/
http://purchasingpractice.com/the-three-goals-of-strategic-procurement/#respondThu, 03 Dec 2015 14:57:04 +0000http://purchasingpractice.com/?p=11819The three goals of strategic procurement – CPO’s must contribute to three strategic goals if they are to influence overall corporate strategy The three goals

]]>The three goals of strategic procurement – CPO’s must contribute to three strategic goals if they are to influence overall corporate strategy

The three goals of strategic procurement

Procurements Golden Triangle

Leading companies are pursuing cost leadership and growth to dominate their industries, and in doing so they create an infrastructure to do it sustainably. Apple is the often cited example of such a strategy. The WSJ reported earlier this year that Apple recorded 92% of the total operating income from the world’s eight top smartphone makers in the first quarter, up from 65% a year earlier. Samsung Electronics Co. took 15%.

By adopting this model in procurement, the three separate goals can be achieved simultaneously:

Rigorous procurement processes are necessary across the value chain to achieve a cost leadership position.

2. Create Growth:

The second goal of procurement strategy development is to create growth opportunities via supporting the product or marketing strategy to drive product or service differentiation, faster and better product innovation and market entry.

CPP: Strategic SCM

Collaborating with key suppliers who work along with the company’s R&D procurement and marketing functions in joint teams to offer ideas for new or improved products and services. This approach can cut development time and significantly reduce the time-to-market.

3. Create a sustainable advantage

Understand your procurement competency portfolios to position the company strategically in the value chain to control the market more effectively (see Figure 3).

Figure 3: CPP Entrepreneurial Procurement Framework

Instead of reacting to market fluctuations, agile companies are designing strategies that help it manage markets to stay ahead of competitors by creating a series of competitive advantages.

Figure 4: Apple competes by creating a series of short-term technical competitive advantages.

While its technical advantages may only be short-term, the efficiency of its supply chain, however, has created a long-term competitive advantage allowing it to dominate supply markets and industry profits.

Market intelligence in procurement is essential to exercising control over supply markets. Deploying technology and dedicated resources to filter information from suppliers as the basic inputs for an intelligence network to garner information:

Who has the technological edge?

Who is most likely to make the next technological breakthrough?

Who has capacity?

Where are likely roadblocks?

With this kind of information, senior management can truly control its value chain and gain and make strategic advantages that are very difficult for its competitors to copy.

The three goals of strategic procurement

Binging it together

Procurement must align itself with the overall corporate and business strategy, so procurement professionals must, therefore, have a clear understanding of their organization’s strategy if they are to play a key role in shaping its future.

The competencies required of procurement to achieve the business goals must be crystal clear, and each role must have clarity in how it contributes to the business goals and the accomplishments expected in the role. This needs to be broken down into the activities and milestones to bring it to life and make it happen.

So a clear competency framework is required to drive both bottom line and top line improvements and to do this sustainably. While cost-focused initiatives such as strategic sourcing have helped to improve the bottom line, the challenge still for most CPO’s is to achieve full alignment with the strategic intent of the business.

Nuff said …

So if you would like to learn more about our services we would love to hear from you.